Telecom sees AAPT savings

By Richard Braddell

WELLINGTON - Cost-saving synergies will benefit Telecom and its takeover target, Australia's third largest telecommunications carrier, AAPT, if Telecom gains control.

In the Part A statement required under Australian takeovers law, Telecom said that a host of joint initiatives in areas such as international bandwidth purchasing and mobile phones were possible. These and other iniatives would boost AAPT's technical and financial credibility and its perception with customers.

Sharing of information, technology and know-how would be based upon arm's-length commercial agreements which would become more beneficial to AAPT at higher levels of Telecom's shareholding.

As previously indicated, Telecom said it did not expect its bid for AAPT to be accepted by all shareholders and its preference was for AAPT to remain quoted on the Australian Stock Exchange.

But the statement envisages considerable exploitation of synergies, particularly in the management of international traffic from Australia and New Zealand using aggregate buying power to reduce outbound per minute call costs.

"Net cost reductions to AAPT would allow AAPT to be more aggressive in relation to price reductions so as to stimulate the retail market and to achieve resulting market share gains," Telecom said.

In addition to leveraging AAPT's interconnection rates in Australia to reduce the two companies' interconnection costs, Telecom is suggesting that the overseas "points of presence" it uses to land its own traffic in key international markets including the United States, and those planned in Japan and Britain, would be jointly used by AAPT.

The two companies would also team up to take advantage of their aggregate demand to secure more favourable volume discounts on international bandwidth, including on the Telecom's 50 per cent-owned Southern Cross cable that is now under construction between Australasia and the United States.

In mobile, Telecom is proposing the two companies jointly review their strategies, particularly with regard to integration of the new digital CDMA networks they are rolling out and in relation to possible transtasman roaming agreements.